We investigate if unemployment fluctuations generate predictability in the cross-section of currency excess returns. To … assess the predictability exerted by unemployment fluctuations, we sort currencies according to past growth in the … unemployment rate. We find that an investment strategy which shorts currencies that experienced high growth in the unemployment …

We build an equilibrium model to explain why stock return predictability concentrates in bad times. The key feature is …

Ljungqvist and Sargent (2017) (LS) show that unemployment fluctuations can be understood in terms of a quantity they … understanding unemployment fluctuations. We show how the LS framework can be adapted to incorporate risk premia. We derive an … show how to use properties of the artificial economy to deduce how risk premia affect unemployment dynamics in the original …

losses, which is consistent with the unwinding of the carry trade in times of high volatility. The decomposition of market …